Market Matters Afternoon Report Tuesday 4th October 2016
Good Afternoon everyone
What Mattered Today
Energy stocks led the charge today with the sector putting on +0.91% offsetting some weakness in the higher yield ‘quasi bond’ like stocks. Materials coys were also good with BHP closing on its highs – up +0.66% to $22.90 while Rio Tinto (RIO) was also strong adding +1.12% to $52.48. No change to official interest rates today with Govenor Philip Lowe keeping the benchmark on hold at 1.50% in his first meeting at the helm.
Importantly, the Statement was very similar in tone to recent ones (under Glenn Stevens) and the market is now factoring in less chance of further cuts than it was a few months ago (hence the weakness in high yield plays). Housing the main area of interest and they still think that an uptick in supply will start to put a cap on prices and any talk of a ‘bubble’ is unfounded. In other words, the market will look after itself.
On the ASX, we had a range of +/- 36 points, a high of 5484, a low of 5448 and a close of 5484, up +5pts or +0.10%. Volume was about 25% below recent averages given school holidays continuing this week.
ASX 200 Intra-Day Chart
ASX 200 daily chart
Bradken (BKN) and Hendersen Group (HGG) charged higher today – putting on +31% and 11.56% respectively. M & A clearly picking up in Oz and we continue to think more will come. Bradken copped at takeover bid at $3.25 from Japanese company Hitachi Construction Machinery Co while Hendersen Group (HGG), announced a merger with Janus Capital Group creating "Janus Henderson Global Investors plc" which will be dual traded in Australia and the US, and will delist in London once the deal is complete, which is likely to be some time around Q2 2017.
Bradken (BKN) Daily Chart
Hendersen Group (HGG) Daily Chart
Bank Inquiry
Today we saw Commonwealth Bank (CBA) front the parliamentary enquiry into the banks. ANZ will be grilled Wednesday then NAB and Westpac will front up on Friday. Each bank faces 3 hours of questioning. Ironically, David Coleman, the Liberal Member for ‘Banks’, which is in Sydney’s South West is chairing the committee.
CBA will have the most to say in regard to financially sensitive answers given they’ve already reported while the other three majors report later this month or early November – so may be hamstrung on some aspects. Clearly the issues raised are very important ones and we support all attempts being made to improve the standards for advice in Australia.
In terms of bank performance, we had a low in July and all have rallied to varying degrees. October is a key month for the banks and they generally perform well…we’re overweight banks despite the current negative headlines and will continue to stay long into seasonal strength over the next few weeks / month
Elsewhere, we’ve been fairly vocal about the risk of expensive defensive stocks priced on yield and cautioned about holding them as rates rise. We’ve now seen many pullback sharply, before a relief rally (dead cat bounce in our view) provides another opportunity to SELL. Sydney Airports (SYD) a case in point here while some of the property stocks like Scentre Group (SCG) have also bounced short term – and can be sold here.
Sydney Airports (SYD) Daily Chart
Scentre Group (SCG) Daily Chart
Sectors
ASX 200 Movers
Select Economic Data - Stuff that really Matters in Green
**Chinese Bank holiday for the rest of the week**
What Matters Overseas
FUTURES higher….
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 4/10/2016. 5:00PM.
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